In a complete turnaround, the markets recovered all of its massive losses of the previous session as it ended the day with strong gains. The de-escalation of the geopolitical tensions between Russia and Ukraine paved the way for the return of confidence which saw a huge spate of short-covering which helped the markets recoup all their previous losses. In the previous technical note, it was mentioned that the markets were sitting precariously on the 200-DMA; any move above 16900-17000 may invite recovery in the markets. The headline index ended with gains of 509.65 points (+3.03%).
Many things happened that can be seen as important from a technical perspective. The NIFTY has again validated the falling trend line as important pattern support; the index has also respected the 200-DMA as a major support area as well. The 200-DMA presently stands at 16811. The current move has prevented a technical breakdown on the charts; it has also kept the markets in a defined trading range of 17000-17500 levels. The weekly options data suggests the maximum Call OI concentration shifting higher to 17500; in the immediate short term, this level can be regarded as one of the important resistance levels.
The Relative Strength Index (RSI) is at 48.01; it is neutral and does not show any divergence against the price. The daily MACD is bearish and trades below the signal line. A large white candle emerged; this not only reflects the strong directional consensus of the market participants but also validates the strength of the support of the falling trend line as well as the 200-DMA.
The pattern analysis shows that the markets have managed to stay in a defined trading range; the most immediate resistance level is 17500. The 200-DMA remains the most immediate support point on a closing basis for the markets.
All and all, the most important takeaway from Tuesday’s session was that the markets have averted a structural breakdown on the charts. It is important to note that the surge that was seen was primarily on account of short-covering; for the recovery to sustain, it will be important that fresh volume-based buying comes in. It is recommended that markets may be approached in a highly selective manner while keeping a vigilant eye on the protection of profits at higher levels.
This was first published by The Economic Times.
Milan Vaishnav, CMT, MSTA
Consulting Technical Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK) | (Research Analyst, SEBI Reg. No. INH000003341)
